a
Case summary:V and M may face many financial challenges over next 20 years, to assess their financial situation their net worth has been determined which does not changed significantly over the years, their plan to take bank loan to pay off credit card debt does not have significant impact on their net worth and liquidity.
Characters in the case : V and M
Adequate Information:V and M both in their late 30s, with two children’s they are expecting to face many financial challenges over next 20 years, they have recognized the need to prepare for their retirement and the challenges aging, they are required to determine their net worth, they are thinking to pay off their credit card debts totaling $1,600, what effects would these changes have on their net worth. It is also required to determine, if V and M sell their New York 2038 bonds, and what effect should it have on their net worth and liquidity ratio.
To determine: The effect of appraisement of home to $200,000 and decrease in value of automobile by $8,500 on the net worth and on their asset to total debt ratio.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
b
Case summary:V and M may face many financial challenges over next 20 years, to assess their financial situation their net worth has been determined which does not changed significantly over the years, their plan to take bank loan to pay off credit card debt does not have significant impact on their net worth and liquidity.
Characters in the case : V and M
Adequate Information: V and M both in their late 30s, with two children’s they are expecting to face many financial challenges over next 20 years, they have recognized the need to prepare for their retirement and the challenges aging, they are required to determine their net worth, they are thinking to pay off their credit card debts totaling $1,600, what effects would these changes have on their net worth. It is also required to determine, if V and M sell their New York 2038 bonds, and what effect should it have on their net worth and liquidity ratio.
To determine: the effect of bank loan for $1,600 to pay off credit card debts worth $1,600 on net worth.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
c
Case summary:V and M may face many financial challenges over next 20 years, to assess their financial situation their net worth has been determined which does not changed significantly over the years, their plan to take bank loan to pay off credit card debt does not have significant impact on their net worth and liquidity.
Characters in the case : V and M
Adequate Information: V and M both in their late 30s, with two children’s they are expecting to face many financial challenges over next 20 years, they have recognized the need to prepare for their retirement and the challenges aging, they are required to determine their net worth, they are thinking to pay off their credit card debts totaling $1,600, what effects would these changes have on their net worth. It is also required to determine, if V and M sell their New York 2038 bonds, and what effect should it have on their net worth and liquidity ratio.
To determine: the effect of selling of New York 2038 bond and transferring cash to savings account on net worth and liquidity ratio.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
Want to see the full answer?
Check out a sample textbook solutionChapter 3 Solutions
MindTap for Garman/Forgue's Personal Finance Tax Update, 13th Edition [Instant Access], 1 term
- Jane and Robert Brown are married and have eight children, all of whom are eligible to be claimed as the couples dependents. Robert earns 196,000 working as senior manager in a public accounting firm, and Jane earns 78,000 as a second-grade teacher. Given their large family, they live in a frugal manner. The Browns maintain a large garden and some fruit trees from which they get most of their produce, and the children take family and consumer science classes so that they can help make the familys clothing. The Browns record no gross income other than their salaries (all of their investment income is earned from qualified retirement savings), and their itemized deductions are less than the standard deduction. In addition, they incur no additional adjustments or preferences for AMT purposes. a. What is the couples 2019 regular tax liability? b. What is the couples 2019 AMT? c. Express the calculation of the couples AMT for 2019 as a Microsoft Excel formula. Place any parameter that could change annually in a separate cell, and incorporate the cell references into the formula.arrow_forwardKelly is a diligent mother who has just finished supporting her two children, Susan, aged 23, and Randy, aged 25, through their university education. Both Susan and Randy have embarked on their careers and have moved out. Kelly wants to continue supporting them by providing financial assistance for their future endeavors, such as purchasing their first home or pursuing further education. She aims to give each of them an equal amount of money when they reach the age of 30. Currently, Kelly has $15,000 in savings, which she plans to allocate to Randy, as she will reach 30 first. She intends to provide Randy with $35,000. Kelly's investments generate a 6% return before tax, and her marginal tax rate is 35%. The inflation rate is estimated to be 3%.All savings are deposited at the end of the year.Required:(a) Calculate the annual savings Kelly needs to make to accumulate $35,000 to give to Randy when she turns 30.(b) Determine the fair amount Inaaya should give to Susan when he reaches 30,…arrow_forwardKelly is a diligent mother who has just finished supporting her two children, Susan, aged 23, and Randy, aged 25, through their university education. Both Susan and Randy have embarked on their careers and have moved out. Kelly wants to continue supporting them by providing financial assistance for their future endeavors, such as purchasing their first home or pursuing further education. She aims to give each of them an equal amount of money when they reach the age of 30. Currently, Kelly has $15,000 in savings, which she plans to allocate to Randy, as she will reach 30 first. She intends to provide Randy with $35,000. Kelly's investments generate a 6% return before tax, and her marginal tax rate is 35%. The inflation rate is estimated to be 3%.All savings are deposited at the end of the year.Required:(a) Calculate the annual savings Kelly needs to make to accumulate $35,000 to give to Randy when she turns 30.(b) Determine the fair amount Kelly should give to Susan when she reaches 30,…arrow_forward
- Sue, aged 48 and Paul, aged 49 have two daughters- Leena aged 17 and Reena aged 15. Sue works as a part-time teacher in a secondary school and earns a $26,000 p.a. salary (plus minimum superannuation guarantee contribution).Paul works as a dentist and earns $145,000 (plus minimum superannuation guarantee contribution). Paul is anxious about their post-retirement financial situation. The couple has approached you for financial advice in respect of reducing the tax payable and their retirement planning. Superannuation Sue (20% Tax Free) 270,000 Sue’s Superannuation asset allocation Investment Asset Allocation Performance p.a. after tax Australian Share 50% 4% Cash & Fixed Interest 15% 1.4% International Shares 30% 10.80% Property 5% 3.10% Calculate the expected return for Sue’s superannuation portfolio using the return for the year ended 2022. Explain to Sue why her superannuation…arrow_forwardAnthony and Amy expect to settle down and purchase a home now that Anthony has a stable job with a solid long- term growth company. They are meeting with their loan officer to determine which mortgage would best suit their needs. Amy is a stay-at-home mom raising their two school-age children. She sometimes provides child care services for her immediate family members. Neither Anthony nor Amy have served in the military, Anthony and Amy want to secure a mortgage that offers the lowest monthly payment with a fixed interest rate. Based on this information, which mortgage would be the most appropriate choice?\\n\\nA)\\nAdjustable-rate mortgage\\nB)\\n30-year conventional mortgage\\nC)\\n15-year conventional mortgage\\nD)\\nVA mortgagearrow_forwardAllen and Meagan, aged 43 and 33, have 2 children aged 6 and 8. They live in their own home, which is jointly owned. The family home is currently worth $675,000, which is on a $275,000 mortgage loan. They have contents worth $100,000. Allen works as a part-time accountant and earns a $32,000 annual salary. In addition to this job, he runs an accounting services business, which earns him $25,000 annually. This business was valued at $45,000 by an independent assessor when he applied for a loan last year, which was not approved. Allen’s employer pays superannuation guarantee payments to an industry superannuation fund, which has accumulated to $50,000. This superannuation fund provides term life cover of $100,000 for Allen. Meagan works as a sales manager and earns $75,000 p.a. Currently, she has $175,000 in her superannuation account. She doesn’t have life insurance cover. On average, Allen, Meagan and the family have monthly living expenses amounting to $8,500. They would like to…arrow_forward
- Joetta Hernandez is a single parent with two children and earns $67,500 a year. Her employer's group life insurance policy would pay 2.5 times her salary. She also has $90,000 saved in a 401(k) plan, $7,500 in mutualfunds, and a $4,500 certificate of deposit. She wants to purchase term life insurance for 15 years until her youngest child is self-supporting. She is not concerned about her outstanding mortgage, as the children would live with her sister in the event of Joetta's death. Assuming she can receive a 6 percent after-tax, after-inflation return on insurance proceeds, use the earnings multiple method to calculate her insurance need. How much more insurance does Joetta need to buy? What other information would you need to know to use the needs approach to calculate Joetta's insurance coverage? Assuming she can receive a 6% after-tax, after-inflation return on insurance proceeds and using the earnings multiple method, Joetta's insurance need is $_____arrow_forwardRaj Shah, aged 36 years, is employed with a MNC. His wife Pooja, aged 34 years, is also working part - time. The couple has two children - daughter Rima aged 7 years and son Ansh aged 4 years. Raj and Pooja require your help to make a few financial decisions. (You can make any assumptions to further build up your case)a. Raj and Pooja want to invest for their children’s higher education for the long term (over 12 to 15 years). Develop a plan so that they can accumulate a sufficient education corpus. b. Raj wants to take a Life Insurance cover of Rs 1.5 crore. Advise him whether he should go for a ULIP or a term insurance.arrow_forwardMark and parveen are the parents of three young children. Mark is a store manger in a local supermarket. His gross salary is 75,000 per year. Parveen is a full time stay at home mom. Use the easy method to estimate the family’s life insurance needs.arrow_forward
- John and Janet are both 61 years old, and they are still working at their current jobs. Neither one of them plans to retire until age 67. They sold their main home, and with the proceeds from the sale, they purchased a condominium and paid for it in full. They have $104,000 left in the bank. Which investment vehicle is appropriate if they want to avoid losing any of the money and use it all for their retirement?arrow_forwardtom is a rich farmer in Tetebia, a town in the Asou Municipal Assembly. He owns over 100,000 hectares of farmlands. However, he fears the worst might happen and wants to do some investments to secure his future and that of his children. He is contemplating some long term investments he could undertake to secure his future and that if his children. He is now 50 years old and he plans to retire in 10 years from active farm work. He expects to live for another 25 years after he retires –that is, until age 85. He was advised by a friend that an investment in the financial market will help him plan his retirement well. He has no idea about financial markets and how they operate. You recently graduated and have just reported to work as an investment advisor at the brokerage firm of Cenden Ltd. tom has approached your company for advice. Your boss after a discussion with tom could gather the following information. tom wants his first retirement payment to have the same purchasing power at the…arrow_forwardDonald Jefferson and his wife, Maryanne, live in a modest house located in a Los Angeles suburb. Donald has a job at Pittsford Cast Iron that pays him $50,000 annually. In addition, he and Maryanne receive $2,500 interest from bonds that they purchased 10 years ago. To supplement his annual income, Donald bought rental property a few years ago. Every month he collects $3,500 in rent from all of the property he owns. Maryanne manages the rental property, and she is paid $15,000 annually for her work. During 2015, Donald had to have the plumbing fixed in the houses that he rents as well as the house in which he and Maryanne live. The plumbing bill was $1,250 for the rented houses and $550 for the Jeffersons’ personal residence. In 2015, Donald paid $18,000 for mortgage interest and property taxes—$12,650 was for the rental houses, and the remaining $5,350 was for the house occupied by him and his wife. The couple has three children who have graduated from medical school and now are…arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT